Littlewoods on course for £1.2bn payout in tax refund battle

Δημοσιεύθηκε: 28 Μαρτίου 2014 - 16:06

Littlewoods is on course for a £1.2bn payout from the public purse, after the High Court sided with the UK home shopping company in a legal fight over how much interest it should be paid on a tax refund.

A judge ruled on Friday that the claims by the retail group - which is owned by the billionaire Barclay brothers - "succeed in full". This gives a green light to the company's demand for compound interest dating back 30 years on refunds of value added tax.

HM Revenue & Customs said it intended to appeal the case, extending a legal fight that has already gone all the way to the European Court of Justice and was referred back to the High Court in 2012. It is one of several cases that involve the government trying to put a lid on claims for refunds of billions of pounds that businesses believe they wrongly paid decades ago.

Littlewoods welcomed the judgment as "clear and robust" but said the legal process could continue for several more years.

Its claim is likely to be highly controversial, particularly at a time of public spending cuts. The company defended its action saying: "The directors of the company are duty-bound to ensure that the company and its tens of thousands of current and former employees are not disadvantaged as a result of the overpayment of VAT."

It said any payout if the case succeeds would be made to companies that are subject to UK corporate tax, not directly to its shareholders. These shareholders are Sir Frederick and Sir David Barclay, the owners of the Ritz hotel and Telegraph Media Group who have homes in Monaco and the Channel Islands.

Giles Salmond, a partner of Eversheds, a law firm, described the ruling as a "landmark decision" that left the government exposed to claims worth several billion pounds from thousands of other companies pursuing similar cases.

HMRC said: "We think today's decision is at odds with how parliament intended VAT law to work and will now seek leave to appeal." The ruling came a day after the Court of Appeal ruled that corporation tax must be paid on VAT repayments. HMRC said this would safeguard up to £800m of tax revenues.

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>Littlewoods has already received a £200m refund for VAT that was wrongly levied between 1973 and 2004 on commissions paid to its agents who distributed mail order catalogues. It has also received more than £250m of simple interest on the VAT refund, but the company contends it should have received compound instead of simple interest.

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It calculated that it is owed an extra £1.2bn - a measure of the huge impact of compound interest, which is charged on interest already earned - to reflect fully its loss from not having been able to use the £200m over the period.

The company said: "HMRC has previously confirmed that VAT was incorrectly collected from Littlewoods for almost 30 years . . . HMRC has also stated that it is every taxpayer's right to seek repayment of overpaid tax and VAT. Today's ruling is the logical consequence of that historic overpayment."

In forecasts published in last week's Budget, the Office for Budgetary Responsibility pencilled in £3.6bn for litigation losses across all taxes over the next five years. HMRC is fighting several other claims, including a £1.2bn claim from British American Tobacco concerning a breach of EU law in a case about advance corporation tax.

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